SINGAPORE, Sept 18 — The Malaysian ringgit rose to its highest in more than five weeks today, leading gains among emerging Asian currencies, as investors bet the US Federal Reserve would scale back its monetary stimulus only modestly later in the day.

The ringgit advanced on real money funds demand. The Taiwan dollar gained on exporters’ bids, while the Philippine peso hit a near six-week high on expectations of stock inflows.     But the Indonesian rupiah bucked the trend on sustained dollar demand from local companies.

The Fed is set to announce the result of its two-day policy meeting later in the day and investors expect it will trim US$10 billion (RM34 billion) of its US$85 billion monthly bond-buying programme.

The US central bank may also seek to reassure markets that actual policy tightening is still far away.

“If accompanied by rhetoric from Bernanke to try to keep a lid on yields, then dollar/majors should emerge weaker,” said Jonathan Cavenagh, a senior FX strategist at Westpac in Singapore, referring to Fed Chairman Ben Bernanke.

Emerging Asian currencies are also seen appreciating, although they have already priced the Fed reduction in to some degree, he added.

Recent weak US economic data caused investors to expect the Fed may dial down the quantitative easing less than initially feared.

Ringgit

The ringgit rose as much as 0.6 per cent to 3.2300 per dollar, its strongest since Aug. 12, on demand from real money funds.

The Malaysian currency gave up some of initial gains as importers bought dollars for payments on dips and on caution before the Fed’s announcement at 1800 GMT (0100 Malaysian time tomorrow) and Bernanke’s news conference soon afterwards.

But current ringgit levels already have reflected the Fed’s cut in its stimulus to some degree, traders said.

“We might see dollar/Asia lower because a US$10 billion taper is already quite priced in,” said an Asian bank trader in Singapore.

“There is a risk that Bernanke might change the 6.5 per cent unemployment target to 6 per cent to warrant a rate hike because they want to keep the long-end yields low,” he added.

Taiwan dollar

The Taiwan dollar advanced as exporters bought the island’s currency for settlements before holidays.

Those companies also purchased the Taiwan dollar, with some expectations that it may strengthen further if the Fed reduces its stimulus by as much as expected, traders said.

But Taiwanese importers bought US dollar for payments on dips, limiting the local currency’s upside.

Taiwan financial markets will be closed tomorrow and Friday.

Philippine peso

The peso gained 0.3 per cent to 43.51 per dollar, its strongest since Aug 12 on expectations of demand linked to foreign investors’ recent stock purchases.

Foreigners were net buyers in Manila stocks on Monday and yesterday.

Traders hesitated to lift the peso above the session high ahead of the Fed’s announcement, but a foreign bank trader said the peso has priced in a US$10 billion reduction in the US central bank’s bond-buying programme.

The Philippine currency may strengthen more, but investors may take profits after the decision as they already added long positions on expectations of the modest policy shift, he added. — Reuters